Shares of PureCycle Technologies (PCT 6.75%) rallied 37.9% as of 1:00 p.m. ET Wednesday.
The company, which is looking to commercialize its polypropylene recycling technology, received a cash infusion today from investors. While the cash raise will dilute investors somewhat, it appears the funding set aside investor fears as the company nears commercialization of its recycling technology.
A show of confidence
Today, PureCycle issued a press release disclosing a $90 million raise from existing private equity partners Sylebra Capital Management and Samlyn Capital, LLC. The $90 million consists of $50 million in preferred stock and $40 million raised in the form of an equity raise at $4.69, which was yesterday's closing stock price. Additionally, PureCycle issued 5 million warrants to its partners that can be converted into stock at $11.50 per share, with an expiration date of Dec. 1, 2030.
Apparently, investors were enthused about the cash infusion, as the company only had about $11 million in cash at the end of last quarter. In addition, investors may have been encouraged by announcements of progress at the company's Ironton, Ohio, plant.
Management says Ironton had processed 10,000 pounds in an hour and experienced two days in which it processed 200,000 pounds per day in September. Management also announced plans to process 1 million pounds in September and then 3 million pounds per month in the fourth quarter. That will also be when the company should begin generating meaningful revenue.
Dan Gibson, chief information officer (CIO) of Sylebra Capital Management, said:
Bringing to market next-generation technology is never easy, but the tangible production progress we are seeing in Ironton is undeniable. Driven by an increasing consumer focus on corporate sustainability goals, we believe the underlying demand for recycled material is immense and unmet. We are excited to continue partnering with PureCycle in bringing its high-quality material to this underserved market.
An exciting time for PureCycle, but with risks
The prospect of any company commercializing a new technology is exciting and brings with it the potential for multibagger returns. However, it's also highly risky. Investors don't really know what revenue and margins will look like in the near term or what setbacks there may be in the initial production ramp.
Still, for high-risk, high-upside investors, it is definitely worth looking into PureCycle. The end markets for polypropylene are huge, and recycled products are increasingly in demand as companies look to boost their environmental, social, and governance (ESG) scores.
